DaVita Pays $34.5 million to Settle Third False Claims Act Case in 10 years Over Kickback Allegations

On July 18, the U.S. Department of Justice (DOJ) announced that Denver-based dialysis giant DaVita Inc. had agreed to pay $34.5 million to resolve allegations it paid kickbacks to doctors for patient referrals to its dialysis centers. This was the third time in 10 years that DaVita had settled with DOJ over kickback allegations. The case was launched under the qui tam provisions of the False Claims Act (FCA) by a whistleblower who alleged three kickback schemes, which have been described as novel, non-traditional, and with a complexity that made it difficult to draw a direct line between DaVita’s actions and its financial gain.  

Under the Anti-Kickback Statute (AKS), it is illegal for a healthcare services provider like DaVita to knowingly and willfully offer, pay, solicit, or receive remuneration, which includes money and anything of value, to induce or reward patient referrals for services reimbursed by federal healthcare programs. In settling this case, DaVita resolved allegations of kickback schemes relating to its pharmacy business, its vascular access center business, and medical directorships at its dialysis centers. 

DaVita Rx is a former subsidiary of DaVita, Inc. that provided pharmacy services for dialysis patients. The DOJ alleged that DaVita engaged in a kickback scheme with its primary competitor in the dialysis market, Fresenius Medical Care, to induce referrals to DaVita Rx to serve as Fresenius’s central fill pharmacy, and to fill its Medicare patients’ prescriptions. In exchange, as a quid pro quo, DaVita allegedly agreed to acquire some of Fresenius’s dialysis clinics in Europe, and to buy certain Fresenius dialysis products.     

For patients to receive dialysis treatment, there must be vascular access, such as an artery vein fistula, artery vein graft, or catheter, to allow the dialysis machine to connect to the patient’s bloodstream. DaVita is also alleged to have induced referrals from the physicians who owned certain vascular access centers and were in a position to refer patients to DaVita clinics. The kickbacks were alleged to have taken the form of uncollected management fees for management services DaVita offered to the physician owners of the vascular access centers. 

Finally, in the third alleged kickback scheme, the DOJ alleged that DaVita paid a large nephrology practice $50,000 to induce referrals to DaVita’s dialysis clinics. Although DaVita allegedly gave the nephrology practice a right of refusal to staff the medical director position at any new dialysis center that opened nearby, DaVita nonetheless paid the practice $50,000, despite the fact that the practice exercised that right.     

The settlement resolves allegations from a 2017 whistleblower lawsuit filed in the U.S. District Court for the District of Colorado. The whistleblower, who I’m pleased to report is a client of my law firm of Whistleblower Partners LLP, will receive $6.4 million as a whistleblower reward.  

It is important to reiterate that this is not DaVita’s first rodeo with whistleblowers and the False Claims Act. DaVita has paid $1 billion since 2012 to resolve civil fraud allegations under qui tam complaints launched by whistleblowers. In fact, the whistleblower in the $34.5 million settlement also played an important role in a $270 million settlement from 2018 against DaVita HealthCare Partners (HCP), settling allegations brought by our client that DaVita HealthCare Partners violated the AKS in its Medicare Part C business, improperly incentivizing both patients, by providing gift cards to encourage them to enroll in HCP’s plans, and providers, by paying bonuses, waiving or discounting fees, and purchasing physician practices above fair-market value.   

Kickback schemes undermine our trust in healthcare, putting profits over patient well-being. This month’s settlement demonstrates that the Government is willing to shut down alleged kickback arrangements, no matter how cleverly hidden. With the help of whistleblowers, the Government can see through sophisticated attempts to avoid scrutiny.

About the Author 

Mary is a partner and co-founder of Whistleblower Partners LLP, a law firm dedicated to representing whistleblowers under the various U.S. whistleblower reward programs. Mary and her colleagues have pioneered a series of successful whistleblower cases against prominent health insurers, hospitals, provider groups, and vendors under the False Claims Act, alleging manipulation of the risk scores of Medicare Advantage patients. Mary is a recognized expert and frequent author, commentator, and speaker on fraud in the healthcare industry, particularly those cases exposed by whistleblowers. Mary is a member of the RACmonitor editorial board and a popular panelist on Monitor Mondays.